Property118 was my Field of Dreams

I built Property118 in the belief that, if I created a place where landlords and good professionals could share knowledge freely, the right people would come. They did. Together, we solved commercial problems that no single profession could solve alone. HMRC spent years fighting what that community created without ever properly understanding it.

HMRC spent years fighting something it never understood

When I created Property118, I was not trying to build a tax business and I certainly was not trying to become involved in years of litigation with HMRC. I wanted to create a place where landlords could share practical experience and where good professionals could contribute their knowledge without every conversation beginning with a fee note. The private rented sector was already becoming more complicated, but the advice available to landlords was fragmented. Accountants understood accounts and tax, solicitors understood legal ownership and conveyancing, mortgage brokers understood lenders, while landlords were left trying to join the pieces together and work out how one professional’s advice affected another’s. Property118 was my Field of Dreams. My belief was simple: build a platform that genuinely helps people and the right landlords and professionals will come. They did, and over time Property118 became a meeting place for people who were willing to look beyond their own narrow specialism and solve real commercial problems together.

That is the part of the story HMRC never understood. They looked at Property118 and saw a promoter. They looked at documents prepared by Cotswold Barristers and saw standardised arrangements. They saw tax consequences and assumed tax avoidance. What they did not see, or refused to see, was the community and the process that sat behind those documents. They did not see the thousands of conversations with landlords about succession, retirement, refinancing, business continuity, early repayment charges, lender restrictions and the practical difficulties of transferring substantial portfolios. They did not understand that the Substantial Incorporation Structure and Capital Account Restructure were not ideas dreamed up in isolation and then sold to unsuspecting clients. They evolved because landlords kept bringing us the same problems and the professionals around Property118 kept applying existing law, HMRC guidance and established professional commentary to find workable answers.

Why did HMRC pursue an argument they could not win?

The more carefully I read the Tribunal judgment in Property 118 Limited & Anor v HMRC [2026] UKFTT 1111 (TC), the harder it is to understand how HMRC ever expected its central case to survive contact with the full evidence. HMRC’s position depended upon presenting the Property118 arrangements as tax-driven products whose commercial explanations were little more than decoration. That argument might have looked plausible if the only material considered was a limited selection of marketing pages and transaction documents, but it became unsustainable once the Tribunal heard from the landlords, accountants, solicitors and mortgage professionals who had actually been involved.

The evidence showed that landlords were not incorporating for one simple reason. Some wanted to preserve competitive mortgages that would have been expensive or impossible to replace. Some were approaching retirement and wanted a structure their families could continue after their death. Some wanted to bring children into the business gradually without making them personally liable for partnership debts. Others had cladding problems, early repayment charges, complex portfolios spread across several lenders or refinancing costs that could run into six figures. Tax mattered, of course it did, because no sensible business owner ignores tax, but it was one part of a much wider commercial decision.

The Tribunal found that users of SIS had two main reasons for choosing its particular features. They wanted to obtain full Incorporation Relief and they wanted to avoid refinancing at the point of incorporation for genuine commercial reasons. That finding destroyed the simplistic story HMRC had tried to tell. It also confirmed something even more important for the tax and legal professions: SIS was not merely another route to the same result as a conventional incorporation involving new company borrowing.

At paragraphs 150 and 151 of the judgment, the Tribunal expressly found that SIS could preserve full Incorporation Relief where refinancing might prevent it from being available in full.

“SIS enables a person to obtain a tax advantage in that it enables him to obtain IR in full which he may not be able to obtain if there was a refinancing.”

That is not my interpretation of some ambiguous wording buried in the judgment. It is what the Tribunal said. HMRC spent years pursuing Property118 on the basis that the arrangements were a tax avoidance product, yet the judgment accepted the commercial evidence, recognised the refinancing distinction and concluded that the statutory DOTAS tests relied upon by HMRC were not satisfied.

Why did HMRC refuse to recognise what its own manuals and leading professional commentary said?

Property118 did not invent beneficial ownership. We did not invent contractual indemnities, the transfer of a business as a going concern, substitute borrowing or the withdrawal of capital before incorporation. These were established concepts long before SIS and CAR were given names.

Simon’s Taxes warned at B9.114 that where a company raised new finance and passed the money to the transferor so that existing property debts could be repaid, there was a considerable risk that HMRC might refuse to apply Extra-Statutory Concession D32. It recommended an appropriate restructuring of finance before incorporation. Simon’s Taxes also advised at B9.112 that where an unincorporated business had a substantial capital account, the owners should draw it down before incorporation or the value would become locked into the shares issued by the company.

HMRC’s own Capital Gains Manual at CG65745 recognised that business liabilities could be dealt with by the company indemnifying the transferor, while BIM45700 had for years explained how business owners could withdraw capital and profits even where substitute borrowing was then required. Property118 did not create those principles. We joined them together and applied them to the real circumstances of landlords whose capital was locked into property and whose mortgages could not simply be transferred to a company without substantial cost and disruption.

The extraordinary part is that HMRC’s own witness accepted that the concern expressed in Simon’s Taxes was valid and that there had been considerable professional concern about refinancing and ESC D32. He had become aware of that issue through this case rather than through his previous work. The Tribunal also recorded that he had not considered the Office of Tax Simplification report before reaching his conclusions.

This was not a dispute where HMRC had carefully reviewed its own guidance, the recognised professional commentary and the commercial evidence before deciding that Property118 had crossed a line. It was a case in which HMRC formed a view first and only encountered much of the relevant evidence after litigation had already begun.

Why was the decision made without considering the wider evidence?

The Office of Tax Simplification Property Income Review should have been required reading for anybody trying to decide why landlords incorporate. It recorded that the predominant factors identified by professional bodies and advisers were not purely tax-related. They included limited liability, finance, ring-fencing of debt, control over income withdrawals, succession planning and the ease with which ownership could be passed through shares.

Those findings were entirely consistent with what landlords had been telling Property118 for years. They were also consistent with the evidence eventually heard by the Tribunal. HMRC’s witness had not considered that report when assessing the arrangements.

That is not a minor omission. If HMRC wished to understand the purpose of SIS and CAR, it needed to understand the purpose of the underlying incorporations and the commercial obstacles faced by the people using them. Looking only at the legal steps and the tax consequences was never going to produce a fair picture.

The Tribunal heard evidence that immediate refinancing could have cost individual landlords between £100,000 and £200,000. Some could not refinance because of cladding. Others had dozens of mortgages across several lenders, with different fixed-rate expiry dates, early repayment charges and underwriting requirements. Replacing every mortgage on one day was not a neat administrative exercise. It could damage cashflow, destroy valuable lending terms and make incorporation commercially impossible.

HMRC could have learned all of that without a Tribunal hearing. We repeatedly offered to meet and explain what we were doing, why the arrangements had developed and what problems they were intended to solve. HMRC refused to engage with us in that way. The department chose enforcement over discussion and litigation over understanding.

What were the consequences?

The Tribunal eventually reached its conclusions, but by then the damage had already been done. Hundreds of landlord families spent years living under the shadow of DOTAS. Clients who had acted on professional advice were treated as users of a tax avoidance scheme. Property118 was publicly named by HMRC, Scheme Reference Numbers were imposed and a Stop Notice was issued. Our reputation was damaged before an independent Tribunal had heard the evidence, while landlords and professional advisers were left trying to explain themselves to lenders, accountants, business partners and family members.

Commercial decisions were delayed or abandoned. Landlords postponed refinancing, succession planning, retirement decisions and disposals because nobody knew how HMRC’s action would end. Professionals spent enormous amounts of time responding to enquiries, reviewing documents and defending work they believed was consistent with the legislation and published guidance. Clients lived with the stress of not knowing whether HMRC would pursue them for tax, penalties or interest, even though many had incorporated for long-term commercial reasons and had no intention of selling their properties.

Property118 also paid a heavy price. A business that had been built around education, collaboration and practical problem-solving became associated publicly with tax avoidance because HMRC chose to publish its allegations before those allegations had been tested. The cost was not only financial. It affected the team, our professional relationships and the confidence of people who had trusted us.

The public purse paid too. HMRC committed years of staff time and legal resources to a case it ultimately lost. At paragraph 187 of the judgment, the Tribunal formally allowed the appeals and cancelled HMRC’s decisions to allocate the Scheme Reference Numbers. All of this occurred after we had offered to meet and explain the arrangements.

Listening would have cost almost nothing. Litigation cost everybody.

Why did HMRC refuse to meet with us?

This is the question I still cannot answer. We were not asking HMRC for special treatment or advance approval. We were offering to explain how the structures worked, what guidance had been relied upon and why landlords were choosing them. Property118 sat in a unique position because we had direct access to landlords, tax advisers, solicitors, mortgage brokers and lenders. We could show HMRC the complete picture rather than one professional’s isolated part of it.

A meeting would not necessarily have produced agreement, but it would have exposed the assumptions on both sides. HMRC could have asked difficult questions. We could have shown the department the commercial evidence, the OTS findings, the Simon’s Taxes warnings and the interaction between tax, beneficial ownership and mortgage finance. Any genuine weaknesses could have been identified and addressed before hundreds of clients were caught in the middle.

Instead, HMRC refused to meet and later relied upon a witness who had not considered the OTS report, had no direct experience of advising landlords contemplating incorporation and had examined only a limited range of material. The judgment described him as “not an impressive witness”.

That outcome was avoidable.

The community HMRC never understood

Looking back, Property118 became far more than the website I originally imagined. It became a place where people who would not normally sit around the same table could share what they knew. Landlords explained the real problems. Accountants explained the tax and accounting consequences. Solicitors and barristers dealt with ownership and documentation. Mortgage professionals explained what lenders would and would not do. The solutions developed because the right people came together.

That was my Field of Dreams. I built the platform and the people came.

HMRC mistook that collaboration for something sinister. It treated joined-up professional problem-solving as the promotion of tax avoidance because the department looked at the tax outcome without properly understanding the commercial problem that had produced it.

The Tribunal heard the wider evidence and reached a different conclusion. It recognised that incorporation involves multiple commercial and tax considerations, accepted that avoiding immediate refinancing served genuine non-tax purposes and found that SIS could preserve full Incorporation Relief where refinancing might not. It rejected HMRC’s attempt to force the arrangements into the DOTAS descriptions and cancelled the Scheme Reference Numbers.

I take no pleasure in the amount of time, money and stress that was required to reach that point. I do take enormous pride in the landlords and professionals who were prepared to give evidence and explain what had really happened. They proved that Property118 was not a factory producing tax schemes. It was a community solving commercial problems.

HMRC spent years fighting something it never understood. My hope is that the department now learns the most obvious lesson from this case. Before assuming the worst, ask questions. Before damaging reputations, examine the wider evidence. Before spending years litigating against people who have repeatedly offered to explain themselves, sit down and listen.

It is nearly always cheaper than going to court.

Download the full Property118 incorporation guide

This article explains why I built Property118, why the structures developed through our community were so badly misunderstood by HMRC and what the Tribunal has now decided. The judgment is important, but incorporation should never begin and end with a tax calculation. It must be considered alongside the commercial performance of the portfolio, existing finance, retirement plans, succession objectives and the future needs of the family.

We have brought those issues together in The Property118 Guide to Strategic Landlord Incorporation. It explains the commercial, legal, tax and financing considerations landlords and their professional advisers should examine before deciding whether incorporation is appropriate and how it should be structured.

Download the free incorporation guide